Saturday, 17 August 2013

Property Law Implications of Fracking

What is Fracking?
It is a process whereby natural gas is extracted from beneath the earth though hydraulic fracturing.  It is not a new process; it has taken place in this country for many years now. 
This type of mining has in the United States led to a substantial reduction in the price of gas for industry and consumer – a reduction of around a third. The Government is hoping for a similar result in the UK  given the existence of massive reserves of shale gas.
There is no legal framework for governing Fracking within the UK. The Government hopes the current safeguards built within environmental and planning law will be sufficient to protect the environment and communities.
So who owns the shale gas? 
In the US it belongs to the landowner whereas in the UK the Crown owns it (Petroleum Act 1988).  So there is unlikely to be Dallas like windfalls on offer.
However to mine the gas the contractor still needs the consent and the cooperation of the landowner to be able to drill down for the extraction to take place. If the drilling company proceeds without their consent and co-operation, it could face delays in starting or continuing to drill or it could find itself unable to drill or continue drilling at all. One project could given the horizontal drilling involve a multiple of landowners as the local authority and the regulators.
Can a landowner claim compensation?
A Government licence is needed to extract it. The licence holder can obtain ancillary rights under the Mines (Working Facilities and Support) Act 1966 - for example, to occupy land, to obtain a water supply, to dispose of effluent, to erect buildings and to lay pipes. The court will grant such rights if it is not possible to agree terms with the Landowner.
Compensation and costs can be sought from the contractor and if necessary awarded by the Court though the measure of that compensation will be based not on the value of the extraction by the contractor but rather the financial loss the landowner will suffer by not having the land available to use.
Common Law and Statute therefore offer protection to the landowner and financial recompense as well as costs will be available.  How the law dovetails with the owners of mineral rights (which need to be registered at the Land Registry by 12 October 2013) and the rights of adjoining land whose land the process may damage/disturb remains to be seen.
MJP Conveyancing  - David Pett