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January shale – new regime needs care

The House of Commons voted before the Christmas break to allow fracking in National Parks and some other sensitive areas. The vote was taken without time for a debate and the Government has been criticised for ‘sneaking through’ changes. As ever with shale news, the changes are less dramatic, and the freedoms to develop greater, than suggested.

A done deal

parlThe reversal of the ‘outright ban’ on fracking in National Parks and Sites of Special Scientific Interests announced in January 2015 has been on the cards since last July, when the Onshore Hydraulic Fracturing (Protected Areas) Regulations 2015 were first published.

MPs have now simply accepted that they make sense.

Effect of changes

The way that the Petroleum Act 1998 provisions (Section 4A) are now drawn, following changes under the Infrastructure Act 2015, means that DECC will not issue consents for ‘associated hydraulic fracturing’ above 1,000 metres depth. It will only grant them below this outside protected groundwater and ‘other protected areas’ (OPAs).

The new Regulations carve back these OPAs to land below 1,200 metres in National Parks, the Broads, AONB and World Heritage sites. It will therefore be possible to hydraulically fracture in these areas, below this depth.

Planning is not the biggest hurdle

Despite the recent award of 159 more licences, the challenges of achieving planning consents and the oil price continue to represent significant barriers for investors. The Government’s decision to recover Cuadrilla’s appeals in Lancashire illustrates the priority being given to taking a clean decision.

It is worth bearing the following mind though:

  • The planning process for consents needed to simply monitor and test drill sites is complex, but there is no ban on granting planning permission in these areas.  The Government’s planning policy approach remains that authorities should give great weight to both the benefits of the mineral extraction and the need to protect of Areas of Outstanding Natural Beauty (AONB), National Parks and general amenity.  Carefully sited and properly mitigated proposals should stand a good chance where they represent the reasonable best alternative.  Marrying that up with the surface access rights available, and communicating it clearly in the planning process, is a challenge.
  • The amended regime for DECC fracking consents needs to be approached with care.  Section 4A of the Petroleum Act 1998 now means that DECC may be tempted to rule out fracking at sites where planning permission includes some land in OPAs for non-fracturing purposes (e.g. parking or pipework).
  • Legal challenges are likely both to the planning process and the DECC consenting process. The new regime appears to allow DECC to consent surface installations for fracking in OPAs.  Given the likelihood of effects on these areas from above and near to ground operations is likely to be greater than fracking at depth, this may be an unintended aspect of the recent changes.

Shale on hold?

We noted in January that planning appeals would be important for shale gas exploration this year. Cuadrilla submitted its appeals in September against Lancashire County Council’s decisions to refuse planning permission for temporary shale gas exploration at its Preston New Road and Roseacre Wood sites (and an application for monitoring installations at Preston New Road). We should expect a forensic bunfight but a clearer path for other schemes when it ends.

Prospectors for appeal

Cuadrilla will be confident of its chances.  The Preston New Road refusal – on noise and landscape grounds – was against officer recommendations and hard to square with the planning policy and guidance on temporary effects.  It will have to show that it has done the best job of mitigating the landscape, noise and traffic impacts though.

picNational planning policies and guidance are now strongly supportive of prospecting for energy minerals and recognise that short term effects are usually going to be acceptable where properly mitigated. Shale developers, including Cuadrilla, have struggled on previous sites to anticipate and address all the effects.

Objectors are not going to go quietly. Given that the Government has signalled its intent to recover appeals to ensure the right result, these points will rightly be tested to destruction in these appeals.

JR claim is a plot thickener

Lancashire approved one of Cuadrilla’s applications – for 91 monitoring stations and three boreholes, to monitor seismic activity and water quality, around the Roseacre Wood site. The Infrastructure Act 2015 now requires that methane in groundwater is monitored over a twelve month period before high volume fracturing can occur. The Government is still considering the proposed amendment to permitted development rights to remove the need for express consent. These associated consents are therefore key to Cuadrilla’s plans.

Cuadrilla is appealing against conditions associated with this permission. That is fortunate, because Roseacre Awareness Group has now been given permission to run its Judicial Review claim against it. The array was granted permission despite the refusals of the main fracking application. Having initially been rejected as an unarguable claim, the High Court has now accepted it, noting ominously that it is “particularly persuasive” that the Council may have misunderstood the need for the array and the policy support for it in national policy, given that it was intended as mitigation for the main scheme.  Whatever the merits of the claim, if the planning appeal can be dealt with quickly enough, it may provide an opportunity to wash up any flaws before an Inspector.

Fracking planning battles on this year

Progress toward operational onshore shale sites remains slow, but 2015 promises to be an interesting year for consenting, protesting and prospecting shale in the UK. We highlight the implications of the failed Balcombe judicial review challenge, information challenges and court orders on public protests.

Development picking up

Fracking operations have ground to a halt since Cuadrilla’s operations at Preese Hall triggered minor earth tremors in 2011.  We expect 2015 to be a crunch year for renewed test drilling and fracking:

  • Drilling at Celtique Energy’s Broadford Bridge conventional exploratory well in West Sussex is due to start in the Spring.
  • Ineos has announced significant UK investment plans and IGas reports finding shale gas at its Ellesmere Port site.  Coastal Oil and Gas also intends to explore coal strata in east Kent.
  • Onshore conventional drilling also continues to deliver results – with investors behind the Horse Hill well in Surrey revising their oil estimates up to 8.2m barrels in December last year.

Public protests and legal challenges

parliamentFew onshore applications currently include unconventional techniques or even lateral wells. In the same way as initial opposition to mobile phone masts, public concern can be a material issue for planning. Its weight will be tested on appeal this year. Until there is a track record of incident free operations, the often hysterical response to drilling proposals will continue.

Trespass, occupation and obstruction of the highway dogged efforts to mobilise new test sites in 2014. Ineos’ announcement provoked a protest at its Grangemouth facility in December last year. IGas’s Ellesmere Port site continues to be beset by ‘lock on’ protests and obstructions to the access.

It is therefore significant that:

  • five campaigners have now been convicted of obstructing the highway outside Rathlin Energy’s Crawberry Hill site in East Yorkshire
  • a possession order has been granted to the owner of land outside Rathlin’s West Newton drill site to allow the eviction of a protest camp, with an initial costs award of £10,000.

Applications and appeals lie ahead

Lancashire County Council has now confirmed that it will decide Cuadrilla’s Roseacre Wood and Preston New Road planning applications at the end of January. Third Energy also announced its plans to apply for permission to test frack at Kirby Misperton in North Yorkshire, near the Flamingo World zoo.  Rathlin has also submitted further proposals in East Yorkshire.

Planning appeals will be important to shale in 2015. Celtique Energy has now appealed the refusal of permission for its conventional exploration site near Wisborough, with a Public Inquiry due to start in September 2015. Celtique may still appeal against the refusal of permission by the South Downs National Park Authority for its conventional drilling scheme at Fernhurst.  In the absence of genuine amenity or ecological concerns, the policy framework for shale remains positive.

Balcombe fracking JR claim fails

The High Court has refused to quash West Sussex County Council’s May 2014 temporary permission for temporary exploration and appraisal (including flow testing the existing lateral well) at its Balcombe site in West Sussex.  The Court rejected the grounds of claim brought by the residents’ group in Frack Free Balcombe Residents v West Sussex County Council, concluding that:

  • the authority was entitled to rely on the Environment Agency and HSE regimes in respect of noise, air and other relevant effects. The judgment confirms that the approach recommended in national guidance is correct.  It also illustrates the need to ensure that planning Committees have in front of them a very clear explanation of the interlocking regulatory regimes (and the views of the regulators);
  • public disorder is not a material consideration for these projects: planning authorities are not entitled to refuse permission for an otherwise acceptable scheme on the basis that it would “excite opposition leading to protests designed and intended to disrupt a perfectly lawful activity“.

newsInformation warfare goes on

Decisions of the Advertising Standards Agency on wind and fracking schemes are a reminder to exercise care in the information battles around contentious schemes.

Residents’ Action on Fylde Fracking, which objects to shale gas exploration in Lancashire, has withdrawn its ‘Fracking – The Truth’ newsletter following a complaint to the Advertising Standards Agency by a geologist Vicar and a retired oil and gas engineer. They complained that it used images of fracking practises from outside the UK not permitted in the UK and included “false and misinterpreted scientific data” that amounted to “scientific drivel”.

The ASA is reported as having reached an informal decision upholding several specific complaints about the newsletter, but also finding that other claims were valid (including those over burning gas flares and a lack of fracking-specific environmental regulation).  The residents’ group has voluntarily agreed not to reproduce the newsletter again.

ASA complaints regularly go both ways in planning battles – the ASA has routinely upheld complaints against windfarm promoters on the basis that technical assessments, statements about house prices and their green credentials are misleading but has also required protest groups to withdraw their own claims about the effect of development on house prices.

Shale gale blows on in 2015

Shale gas exploration looks set to face a defining year in the UK as changes to land access rights are finalised and new PEDL awards extend the licensed onshore area. We highlight the ongoing interest in shale and the implications of the Government’s emerging Infrastructure Bill.

Investor and public interest unabated

The Government’s 2014 autumn statement announced a £5m fund for public information on shale regulations and £31m for research centres. It also gives details of a Sovereign Wealth fund for shale. Investors are for the time being following suit: the announcement by Ineos last year that it intends to invest £640m in UK fracking illustrates ongoing commercial interest in shale prospecting.  

Meanwhile, Tamboran is reportedly seeking damages from the Northern Ireland government after being told that its drilling licence will not be extended and that its test drilling would require planning permission. The proposals had generated significant public controversy despite not including any unconventional activity.

shale

PEDLs and Mergers

The Government is expected to announce the outcome of the 14th Onshore Licensing Round for exploration and development licences soon, which may significantly expand the areas licensed for onshore oil and gas development.

The Competition and Markets Authority’s recent decision not to refer IGas Energy plc’s acquisition of Dart Energy Limited  to the Competition Commission, notes the importance of DECC’s role in agreeing works programmes and other controls for shale development at the PEDL award stage. As we noted last summer, the  decision to address environmental assessment requirements at the individual PEDL licence stage means that the PEDL award decisions will be more heavily scrutinised than ever.

Land access rights on the way

The Government consulted last summer on streamlining underground access rights for geothermal and PEDL operators so that they do not have to rely on the existing but cumbersome compulsory wayleave process under the Petroleum Act 1998.  The Infrastructure Bill 2014-15 has reached its Committee Stage in the House of Commons and is anticipated to come into force before the General Election on 7 May 2015. The impact assessment recently published by the Regulatory Policy Committee validates the Government’s estimate that the access measures will generate a £65 million annual benefit for business.

The Bill includes the following measures intended to overcome difficulties of notifying and negotiating with the number of owners who may be affected by, and resisting, fracking operations:

  • an automatic right of access to land at a depth of at least 300 metres below the camsurface for petroleum and deep geothermal operations.
  • a scheme for payment and notice to affected landowners where the right is to be exercised.

Drill Down

It is important to note that:

  • The existing compulsory wayleaves regime – negotiation or court process – will apply above (and including) 300 metres depth.  Surface access deals will therefore continue to attract significant value.
  • Operators will be able to rely on the new, automatic, access rights for lateral drilling below 300 metres, without trespass claims.
  • Two further property rights are included: firstly, the right to ‘pass and keep any substance’ below 300 metres; and secondly, to leave land ‘in a different condition from the condition it was in before an exercise of the right of access (including by leaving any infrastructure or substance in the land)’.
  • The community benefits scheme is voluntary.  It currently works off the UK Onshore Operators Group proposal for £20,000 to be paid to UK Community Foundations on trust for the local community for each unique lateral well.  The Secretary of State will have a power to step in where this is not being honoured. The Bill itself envisages that the payments are made in respect of each unique lateral over 200 metres, but it remains unclear whether landowners will benefit.
  • Notice requirements will also apply.

Ineos have committed to guaranteeing local communities a 6% share of future shale revenues – it estimates this could be worth up to £400m over 15 years in a 100 km2 area with 200 drilled wells.  Further details are awaited on how UKOOG and Ineos will secure these payments and define the benefitting communities.

Shale planning: forward guidance is not new policy

Publication of the Government’s criteria for the 14th Round of Petroleum Exploration Development Licences (PEDLs) has been carefully  choreographed to address concerns about the environmental effects of unconventional exploration, including for shale oil and gas. The DECC publication has been accompanied by additional Planning Practice Guidance (PPG) and written statements to Parliament and the House of Lords.  Whilst the Guidance changes nothing, there are some clear political signposts to which applicants and objectors will need to pay attention.

Hearts and minds

Although the new PEDL areas cover roughly half of Great Britain, the areas identified as the major shale gas/ oil plays by the British Geological Survey are much more limited. The number of PEDL awards is therefore likely to be a small fraction of the 1,040 available 100 km2 licence blocks. Nonetheless, the ‘Planning for hydrocarbon extraction‘ PPG has been prepared to give comfort to those concerned about the effects of development in Areas of Outstanding Natural Beauty, National Parks and World Heritage Sites (WHS).  It states that where unconventional hydrocarbon development in these sensitive areas is ‘major development’, there has to be an exceptional case and a public interest for allowing it to proceed. This is already being heralded as prohibiting  unconventional oil and gas development in these areas other than in exceptional (or in the case of WHS, wholly exceptional) circumstances. That is wholly wrong.

Nothing new

The PPG restates what is already in the NPPF (paragraphs 116 and 133) on development in sensitive areas. There must only be an exceptional case and a public interest where it is ‘major development’. Three things:

  • the Guidance cannot, legally, add anything to the NPPF policies. A plain reading confirms it does not try to. The written Statement to Parliament summarises the approach as simply “recognis[ing] there are areas of outstanding landscape and scenic beauty where the environmental and heritage qualities need to be carefully balanced against the benefits of oil and gas from unconventional hydrocarbons“.
  • the PPG does not say whether fracking is ‘major development’, which is sensible because ‘major development’ is not a precise term. It is not simply ‘minerals extraction and working’ (as, for procedural purposes, under the Town and County Planning Development Management Procedure Order 2010). It must flow from a planning judgment about scale and impactsR (Aston) v SOS CLG [2013] EWHC 1936.
  • the PPG does now emphasise the importance to be attached to onshore exploration in the Government’s Annual Energy Strategy.

The Government has been clear about the national significance of onshore unconventionals. The House of Lords Economic Affairs Committee also called for more to be done to achieve it in May this year.  It is worth bearing in mind in that context how the ‘exceptional circumstances’ test is applied in practice  In the Secretary of State’s recovered appeal decision in February 2013, permission was granted for 250 homes in the AONB at Highfield Farm, Tetbury on the basis that whilst it was ‘major development’ it was justified by the need and lack of alternative sites. In the sensitive areas referred to in the Hydrocarbon PPG, it will be important to be able to show that the intended surface access site is both the best available alternative and as well designed and mitigated as it can be. Transportation, landscape design and noise disciplines will be critical.

Political signposting

Nonetheless, the statements accompanying the PPG make it clear there will be enhanced oversight of planning appeals on these points – recovery by the Secretary of State is likely. Given how that has worked for appeals on the application of the supportive NPPF renewables policies to windfarms, there is a political marker that effects, mitigation and the balance of benefit are going to be very carefully scrutinised by a political decision maker, particularly in the run up to the next election.

Special case?

siteMuch is said about the novel aspects of unconventional oil and gas development onshore. There are regulatory and technical challenges. Transportation, waste and water issues are critical.  West Sussex County Council’s refusal of Celtique’s conventional site mobilisation application at Wisborough Green illustrates the risk that technical work gives a soft target for refusal.

The policy environment for onshore exploration (both conventional and unconventional) is supportive though.  Where schemes are appropriately-sited, well-mitigated and can operate safely from a highways and hydrogeological perspective, it should be rare that they are refused even where they are in AONB and other sensitive areas. After all,

  • the NPPF is clear that energy minerals need to be extracted where they are found and that minerals planning authorities must give great weight to the benefits of the extractive development, including to the economy (paragraph 144);
  • it is clear – following the recent Europa Oil and Gas judgment – that both shale prospecting and production phases fall within the NPPF 90 approach to mineral exploration in the Green Belt – they are not ‘inappropriate development’ per se. Given that the policy approach to Green Belts is intended to preserve openness, that is relevant to the approach to effects in AONB and other areas;
  • the temporary and reversible nature of minerals permissions means the nature of the impacts they have are very different to more permanent forms of development (as recognised by the Inspector in the Europa appeal decision).

199 of the UK’s 2,000 consented onshore wells are at Wytch Farm installations in Dorset, which covers a World Heritage Site, an AONB, several SSSI and various nature reserves.  It is well screened, there has been no discernable impact on property prices and no-one seems to care. Its business rates contribution alone last year was around £3million. If permission was sought now, the answer would presumably still be ‘yes’.

The fact that the PPG singles out unconventional hydrocarbon applications is odd – conventional drilling mobilisation will be largely the same in the initial stages. Applicants will need to look at how they use initial, conventional, applications to set sites up (followed by later approvals for the unconventional operations, which will be largely focussed on lorry movements of water and other wastes). Minerals Planning Authorities will need to be careful how they screen applications for EIA.

Shale Round takes shape

The Government has published the application criteria for the 14th Onshore Petroleum Exploration Development Licence (PEDL) Round, accompanied by new Planning Practice Guidance (Planning for hydrocarbon extraction) for use with applications.  There are some surprises in the PEDL materials, which significantly increases the need for planning and environmental input at the PEDL licensing stage. Whilst the PPG offers nothing new, it is a large political signpost away from National Parks and Areas of Outstanding Natural Beauty until the next General election.

PEDL Harder

The PEDL regime is the bidding process for companies seeking licences to explore for onshore oil and gas under the Petroleum Act 1998.  The licence terms for the 14th PEDL Round have been tailored to reflect the approach to ‘unconventional’ oil and gas exploration, including ‘drill or drop’ provisions (extinguishing the licence if progress has not been made to implement it) and licences that enable multiple operators to carry out initial exploration.  The PEDL application criteria now published by DECC set out the financial hygiene, competence and governance requirements for licence awards.

The DECC criteria introduces a new requirement, for detailed Statements
of Environmental Awareness
(EAS) to be submitted with licence applications, to ‘demonstrate applicants’ understanding of the environmental sensitivities relevant to the area proposed’.  Narrowing all the geophysical and other data down to get to a feasible surface access point for fracking in the UK is a challenge. The EAS requirement is at least partly a reflection of how poorly some of the current PEDL operators are perceived to have managed the interface with ecological and other sensitivities.  It is also intended to deflect legal criticisms of the PEDL process (see below).

shaleNew challenges

The new requirements provide the opportunity for environmental, planning and regulatory consultants to help PEDL applicants demonstrate a deep understanding of the following (and how it will shape their exploration activity):

  • UK onshore Environmental and Planning Legislation relevant to exploration; development, production and decommissioning stages;
  • The environmental sensitivities of the PEDL area – a 100 km2 ‘Block’ – and their options for addressing these in the operational phase
  • How the ‘Mitigation Measures’ proposed in the Government’s Strategic Environmental Assessment report (AMEC, December 2013) will be put into play operationally.

The EAS must also contain a context analysis identifying all ‘significant’ environmental sites in the PEDL Block (and sufficiently close to it to be affected).  ‘Particularly comprehensive and detailed’ analysis will be required where the area is within or adjacent to any National Park, or the Broads, or any Areas of Outstanding Natural Beauty or World Heritage Site.

The challenge for PEDL applicants will be considerable, given the scale of the Block areas, the scrutiny by national and local interest groups and the fact that the Government is relying on this analysis to discharge Conservation of Habitats and Species Regulations 2010 requirements.

To put the task into context, the DECC 14th Onshore Round Map  suggests that the c. 15,000 km2 (c 1.5 million ha) area already licensed will increase by around 104,000 km2 (c. 10.4 million ha). The total licenced area (assuming all the 14th Round licences were in fact applied for/ granted/ progressed) would be around 50% of the surface area of Great Britain (excluding Northern Ireland) – roughly a seven-fold increase in the licenced area.  In reality, DECC is understood to have set an internal target of approving 30 licences (out of around 1,040 available Blocks). Several existing licences have been relinquished in the last few months due, often, to a failure to progress exploration. They may be re-licenced in the 14th Round.

Legal challenges

Some form of legal challenge to the 14th PEDL Round (or to individual licence awards) is likely. The Government decided to undertake Strategic Environmental Assessment but not a Habitats Regulation ‘Appropriate Assessment’.  As the written statement to Parliament explains, the Government has decided to address the requirement at the individual PEDL licence stage where greater detail will be available.  The new Environmental Awareness Statement requirement is clearly intended to address this, by ensuring the environmental effects are dealt with robustly.

A future post will review the implications of the new planning guidance for applicants in relation to both the new and existing PEDL areas.