UK: Getting To Grips With Shale

Last Updated: 13 August 2013
Article by Mark Challis and Paul Thompson

The Government believes there is huge potential in shale gas exploitation to broaden the UK's energy mix, to boost local economies and to create thousands of jobs - significant and widespread exploration now looks likely to happen

Introduction

Shale gas exploration now has a green light in the UK and its widespread development looks to be only a matter of time. The industry thinks we can expect about 20 to 40 exploration wells to be drilled in the next couple of years.

In 2010, the Department for Energy and Climate Change (DECC) consulted on a strategic environmental assessment (SEA) in preparation for a 14th onshore oil and gas licensing round. That process was suspended following the seismic tremors encountered during fracking operations at Preese Hall in Lancashire but it has now been re-started and DECC expects to consult on a new SEA for the 14th round in the autumn. In what was the 13th onshore licensing round, 93 Petroleum Exploration and Development Licences were granted in May 2008.

The UK Government believes shale provides a massive opportunity to broaden the UK's energy mix, to boost local economies and to create thousands of jobs. As a result, significant and widespread exploitation of shale gas in the UK now looks likely to happen.

Recent developments

Following DECC's announcement in December 2012 that exploratory hydraulic fracturing (or 'fracking' as it is often known) could resume in the UK, we have seen:

  • in March 2013, DECC announcing the creation of the Office for Unconventional Gas and Oil (OUGO);
  • the Budget announcement that Government would introduce a new field allowance for shale gas;
  • in April 2013, the House of Commons' Energy and Climate Change Committee recommending that further exploratory operations be encouraged;
  • a range of revised estimates of shale gas potential in the UK including a British Geological Survey report on the Bowland shale area between Wrexham and Blackpool in the north-west, and Nottingham and Scarborough in the east which suggests reserves are as much as twice the size of the previous assessment and that reserves in the UK are generally vast. They could make the UK a leading player in the development of shale gas globally;
  • following a consultation in 2012, CLG announcing in June 2013 that it has decided against treating large onshore gas extraction (above 500,000 cubic metres per day) as nationally significant infrastructure projects that require to proceed by development consent order under the Planning Act 2008, but would keep this under review;
  • a publication in June 2013 of the United Kingdom Onshore Operator's Group (UKOOG) Community Engagement Charter, accompanied by an indication from DECC that communities situated near each exploratory hydraulic fracturing well will receive £100,000 and one per cent of revenues from every production site;
  • publication by CLG in July 2013 of Planning Practice Guidance for onshore oil and gas;
  • following an announcement in the March Budget, the Treasury now consulting on a new shale gas 'pad' allowance, which would reduce the tax on a portion of a company's production income from 62% to 30% at current rates and is based on existing field allowances for oil and gas production, which are expected to help encourage nearly £14 billion of investment in 2013 - the highest on record;
  • a substantial 'Westminster Hall' debate in the House of Commons on 18 July 2013, when MPs raised widespread constituency concerns; and
  • on 30 July 2013 DECC issuing an information paper in Q&A form on shale gas and fracking.

Who does this concern?

The short answer is 'everybody', but particularly energy developers and the local communities that are liable to be affected by exploration and extraction, individual land owners whose land will be needed and those including nature conservation interests, recreational interests and water companies whose particular interests may be affected. The key players at a regulatory level are:

  • DECC and CLG as the government departments responsible for energy in the UK and for planning in England (planning in Scotland and Wales being devolved to the Scottish and Welsh Governments);
  • the minerals planning authorities (County Council, Unitary Authority or National Parks Authority) in England and Wales which are responsible for granting planning permission;
  • local highway authorities (County Council or Unitary Authority) and street authorities (Unitary Authority or District Council in England and Wales) in relation to (non-trunk road) highways impacts and street works;
  • the Environment Agency in England (NRW in Wales and SEPA in Scotland), in relation to groundwater protection, abstraction and discharge of water, treatment and disposal of mining waste, emissions to air and regulation of radioactive materials; and
  • the Health and Safety Executive, in relation to all aspects of safety.

What authorisation is needed for exploration and exploitation?

It will depend on the circumstances, but the consents will include:

  • a licence or greater interest from the landowner at ground level and from any other landowners controlling access to the site;
  • a Petroleum Exploration and Development Licence from DECC;
  • well consents from DECC; and
  • planning permission from the Minerals Planning Authority.

A number of other consents, including in England additional consents from DECC, environmental permits from the Environment Agency (NRW in Wales and SEPA in Scotland) for abstraction and discharges and treatment and disposal of radioactive and other waste), protected species licences from Natural England (NRW in Wales and SNH in Scotland), highways consents from the local highway authority and consent from the Coal Authority in coal mining areas may also be required.

How can help?

Bircham Dyson Bell LLP is one of the country's leading law firms specialising in assisting those involved with the authorisation and/or delivery of major infrastructure projects. We act for developers, regulators and those directly affected and are particularly well known for our role in advising on nationally significant infrastructure projects and other special forms of statutory authorisation. Matters that we can assist with include:

  • providing briefings, knowhow and updates on the legal, policy and regulatory regimes;
  • helping to engage with politicians, advisers, officials and other key stakeholders in the sector;
  • advising on the National Policy Statements, National Planning Policy Framework and local plans;
  • advising on, including preparing, advancing and responding to, applications for planning, licensing and other authorisations;
  • settling planning performance agreements;
  • advising on and auditing environmental impact and habitat assessments;
  • devising or responding to consultation and public engagement strategies;
  • negotiating rights of access and interests in land, including options, leases and licences;
  • advising on community benefits packages;
  • drafting and/or negotiating s.106 agreements and advising on CIL issues;
  • drafting and/or negotiating protective agreements, including provisions for ongoing consultation, engagement and approvals, the settlement and implementation of accommodation works and mitigation, monitoring, remedial works and step-in rights, indemnities and dispute resolution;
  • procurement and construction contracts; and
  • judicial review and legal challenges.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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