After months of uncertainty as to whether it would get side-lined due to the May General Election, the Infrastructure Act has now come into force. It will have huge implications for petroleum extraction in general and, specifically, the future of unconventional gas extraction or hydraulic fracturing ('fracking').
Crucially this Act closes the door on the gathering momentum of trespass cases being used tactically to attempt to frustrate hydraulic fracturing initiatives.
Although petroleum in a landowner's land belongs to the Crown, it was previously (confirmed by the case of Bocardo S.A. v. Star Energy [2010]) a trespass to drill underneath a landowner's land without consent to access such deposits (even hundreds of metres below surface level). This in turn could mean potentially higher costs and long delays to any extraction project.
There will now be an automatic right of access to "deep level" land (300m or lower) "for the purposes of exploiting petroleum or deep geothermal energy". Crucially this means that surface landowners cannot object to such access. Access above 300m (including surface access) does still require consent. In addition there is the right to leave the deep level land in a different condition than it was in before the exercise of the right.
The Secretary of State "may, by regulations require relevant energy undertakings to make payments" in respect of any future or existing right. Payments may be made to the owners of the land or to "other persons for the benefit of areas in which relevant land is situated". The detail of how landowners and interested parties will be compensated has yet to be fleshed out. Until the Secretary of State makes these regulations, any compensation will be voluntary and it seems likely that the Secretary of State will wait to gauge the success of such voluntary schemes before deciding whether further regulation or guidance through DECC is necessary.
Compensation is likely to be split between:
(a) Landowners; and
(b) Local residents (possibly via a "community benefits scheme").
The United Kingdom Onshore Operators Group's current proposal is that for each well site where hydraulic fracturing takes place, £100,000 should be paid to the local community plus 1% of future revenues (split between the local community and the County). It is unclear what (if anything) the landowners would receive under this proposal and whether these sums would be provided in cash or partly as benefits in kind (e.g. upgrading local infrastructure). INEOS are reported to have proposed a 6% levy from future shale gas revenues, with 2% going to the community and 4% to the landowners.
It will be interesting to see whether other companies follow the INEOS lead. Operators will need to come up with a fair compensation scheme or risk having one imposed (potentially retrospectively) by the Secretary of State.
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