When UK shale gas extraction by fracking first began to feature in press reports some years ago, there was a belief that lords of the manor would profit substantially from energy companies drilling beneath lands subject to manorial rights. The reasoning appears to have been as follows. English law allows for the ownership of land and rights over or under the land to be vested in different parties. Lordship rights, if separated from surface ownership, would allow the owner of those rights ownership of minerals beneath the surface. Since gas is a mineral, a lord of the manor in whom mineral rights was vested would be entitled to ownership of the gas.
The Crown and minerals
The problem with this analysis was that it took no account of legislation which nationalised gas. Hydrocarbons – gas, oil and coal – have been vested in the Crown since 1934, and this explains why government can issue licences for shale gas exploration and extraction. So lords of the manor cannot claim ownership of shale gas, even if they own the land from which the gas is extracted. But that is not the end of the matter. What is the position where an energy company has possession of a licence and starts, or intends to start, operations on or affecting land which the lord owns or which he may not own but in respect of which he has mineral or sporting rights?
The answer to this question is by no means straightforward and will inevitably depend on the particular circumstances. However, there are three key features that will frequently appear and will determine the basis and course of negotiation (or confrontation) between the lord and the energy company.
The parties involved
First, it is necessary to consider the identity and position of the parties involved. The lord may or may not own the land which the drilling affects. If he does, then his ownership includes all minerals beneath the earth but not gold or silver which, together with hydrocarbons, are vested in the Crown. Where the lord owns the land, then questions of access to the land and compensation can be dealt with directly between him and the company. If agreement cannot be reached, the matter is likely to be referred to court by the Secretary of State.
However, where ownership is separate, there will be not two parties involved but three: the lord, the energy company and the landowner. The involvement of three parties gives rise to the possibility of alliances in which the landowner’s role is pivotal. The licence to the company to search for, bore and get gas will almost certainly have been granted by central government without his knowledge or consent. Yet his consent will be needed by the company to access and occupy any land of his where the company intends to set up a drilling site. Without that consent, the company will have to apply to court for an order requiring the landowner to grant access in return for appropriate compensation at a level to be determined by the court.
If the lord’s rights are affected by the drilling for and getting of the gas, then he too may be entitled to compensation from the court. But he will not have the same power as the landowner to deny access and thereby delay drilling operations in order to maximise the value of any agreed settlement. The lord’s best course may be to work with the landowner in negotiations with the company. If he cannot, then he will need to inform the landowner and the company how his own interests are affected by the company’s operations, and if agreement cannot be reached about compensation then he may need to go to court to get it.
Mineral rights and sporting rights
The second feature concerns the extent of the lord’s rights. What are the relevant rights and how are they affected? Although the scope of manorial rights is wide, the rights most likely to be affected are the lord’s mineral rights. The word ‘minerals’ has no precise meaning in English law but refers collectively to substances on or under the surface of the land which may be valuable. The lord’s entitlement to whatever is not vested in the Crown leaves him everything else such as limestone, lime, clay, stone, gravel and quarries. The existence of such rights and their value would need to be established by evidence; and the principal determinants of value will be the extent of the minerals concerned, their ease of working, the prospect of an intention to work them in the near future, and the landowner’s attitude towards access because the lord cannot get at and work the minerals without the landowner’s consent. If the land is held freehold and has no lord so that the mineral rights vest in the landowner, then the same considerations apply.
A further category of lordship rights that could be affected are sporting rights. Whether or not the lord owns the land from which drilling operations are conducted, it is not difficult to foresee that such rights, owned by a lord or indeed by any landowner, could be affected by the environmental consequences of fracking. Over the last twenty years those consequences in the USA have included the contamination of domestic and agricultural water supplies, air pollution resulting from methane gas rising from underground to the surface, the risk of explosions due to the presence of methane in water, health problems for individuals living in areas where fracking has taken place, and earthquakes. Within the UK, drilling companies and government say that careful regulation and improving technology will minimise the risk of environmental damage. However, Cuadrilla’s operations in the Bowland shale near Blackpool in 2011 occasioned two minor earthquakes (measuring 1.5 and 2.2 on the Richter scale), and it remains uncertain whether the UK’s experience of fracking will be free of the problems seen in the USA.
What, then, should a lord or landowner do who faces the prospect of interference with his sporting rights or other interests? He can either negotiate with the drilling company before operations begin in order to agree compensation for any loss to his rights or interests. Or, should negotiations fail or prove impractical, he can apply to court for injunctive relief if and when it becomes apparent that fracking is likely to cause such loss. If it is unclear whether fracking will cause him loss but later, after operations commence, it does, then he can seek compensation by agreement or damages through the courts.
Horizontal drilling and manorial waste
The third feature concerns the implications of horizontal drilling. Pipes from the wellhead will be sunk vertically but at some point, perhaps kilometres below surface, they will turn and run horizontally or at an angle. The length of the horizontal or angled run may also extend to several kilometres so that the pipes are likely to run under land belonging to neighbouring landowners whose property adjoins or is not far from the property on which the wellhead stands. This matters because English law recognizes the principle cuius est solum, eius est usque ad coelum et ad inferos (‘the owner of land is entitled to the surface itself and to the sky above it and everything below it’). Thus the energy company needs the consent of any landowner beneath whose land the company’s pipes run, and in the absence of that consent the company will be liable for trespass. This requirement for the consent of parties other than the landowner from whose land the drilling operations are conducted offers opportunities both to neighbouring freehold landowners and to lords who are owners of manorial waste. They too can seek financial compensation from the energy company if pipes run beneath their land. Lords should therefore do what they can to ascertain and establish their entitlement to waste. This entitlement should not be affected by the change of status to manorial rights after 12 October 2013 when they cease to be overriding interests.
The following points about fracking can be made in relation to lords and landowners:
- It offers them little in terms of enhancing their ability to profit from mineral rights.
- It will require them to be vigilant in the defence of their existing mineral and sporting rights.
- It may, where they own land, offer them more as a result of the law of trespass because their consent will be required by energy companies for access to or under their land for drilling operations.
Paul Stafford is a barrister
at the specialist Chancery set
Ten Old Square in Lincoln’s Inn.